Hot News

Advantages of Outsourcing Hotline Operations

Andrew H. Joseph, J.D.

Introduction

Companies must establish and publicize a system through which employees and agents can report improper or criminal conduct within the organization without fear of retribution. The U.S. Sentencing Commission Guidelines call for the "establishment of a systematic approach for employees to report violations outside the chain of command to a higher authority in the company." The OIGs Compliance Program Guidance for Hospitals states, "the OIG encourages the use of hotlines (including anonymous hotlines)." Hotlines that satisfy the requirements of both the Guidelines and the Program Guidance can be operated in-house or through an outside firm. However, there are a number of factors to consider when deciding how to establish this critical component of a companys compliance program.

In-house vs. Outsourcing Hotline Operations

If you choose to perform this service in-house there are several factors you must take into consideration in order to operate an effective hotline. First, trained operators, who are able to handle sensitive issues, should run the hotline. Voice mail systems are not recommended because an operator, asking appropriate questions, is much more likely to elicit important information related to issues raised by hotline callers. Also, voice mail systems will compromise the anonymity aspect of the hotline because someone could recognize the callers voice. Furthermore, you need a full-time employee, as well as back-up personnel, to cover the line when your primary operator is not available. Of course, you can utilize existing personnel to handle incoming calls. Depending on volume, however, there will be the cost associated with the time these employees spend answering the hotline and generating the initial report. Next, you need to consider the costs associated with implementing the technical side that is, establishing a toll-free telephone number with multiple lines. The final factor to consider is the anticipated call volume. On average, the hotline will receive approximately 1 call a month per 1,000 employees. The volume may vary depending on advertising, employee confidence and current issues affecting the company. The total cost of implementing an in-house hotline can range, on average, from $15,000 to $40,000 per year. The call volume received by small to mid-sized companies may not justify this expense. Furthermore, attempting to utilize existing resources to run a hotline may result in an ineffective, problem-plagued operation. Therefore, outsourcing this function may be an appropriate option for many companies.

The cost for outsourcing your hotline is certainly less, in terms of time and money, than operating an in-house hotline. Various agencies and firms operate nationwide hotline services with fees usually based on the number of employees. Generally, the cost of outsourcing this function will range from about 5-15% of the cost of operating in-house. Also, an outside agency will produce the initial hotline report and, depending on capabilities, many also provide follow-up and summary reports as well. An outside service can guarantee full-time coverage during hotline operating hours whereas an in-house operation may be hampered by employee vacation, sick-time, etc. Most importantly, a well run outside hotline company can provide you with expertise and guidance to ensure that hotline calls are handled effectively and professionally.

It is critical that proper policies and procedures be developed for operation of the hotline function. A specific answering protocol must be used to assure consistency and accuracy, including, extending and protecting the anonymity and confidentiality of callers. Some callers prefer anonymity or confidentiality. This should be respected at all times, except as limited by the law. When callers identify themselves, information about their position, location and how they learned about the problem they are reporting should be noted in detail.

Most calls can be expected to be in the human resources arena, however they tend on average to be more sensitive than complaints passing through regular channels. Evidence to date has indicated that, in addition to receiving information about possible violations of law, regulation and codes of compliance/conduct, many calls relate to such diverse matters as wrongful discharge, discriminatory practices and sexual harassment. The fact that these types of calls were handled by properly trained and managed hotline staffs have permitted interventions that could have otherwise resulted in costly litigation.

There can be a downside to outsourcing this vital function. First, you are entrusting sensitive corporate information to a third party. Thus, you should ensure that your contract contains a strict confidentiality agreement. Also, the contract should have an explicit record retention (or rather, record destruction) policy so that the third party does not become a repository of corporate information. Next, you should ensure that the third party has properly trained operators with sufficient expertise in your industry. This will allow you to receive the most complete and accurate reports possible. Obviously you will sacrifice some control of the hotline if it is outsourced; however, proper research and planning can alleviate potential problems.

Other Considerations

Hotline calls need to be recorded and traced to conclusion. These records, in turn, must be purged periodically. Legal liabilities can be raised for a company that fails to purge records that identify or potentially lead to the identification of callers. Hotline calls, and the manner in which they are handled, must be tracked and reviewed by an oversight group within the company to assure quality control of the operation.

Calls raising serious issues are often resolved in cooperation with the legal or internal audit functions. Hotline callers need to be made aware at the time of their call that feedback may be quite limited due to the companys obligation to protect the rights of the accused as well as the accusers. Those who answer calls should scrupulously avoid making promises to callers and binding the company to a course of action that may not be appropriate.

It is important to realize that employees may be improperly motivated in using the hotline, whether in-house or outsourced. They may see it as means of revenge against a supervisor or fellow employee for a real or imagined offense. Poor performing employees might use the hotline as a means to try and protect themselves under the mantle of a "whistleblower." In short, the employee may not be telling the entire truth, or worse, may be fabricating the allegations. Another danger can arise from a hotline call in which a caller who discloses his or her identity later provokes a wrongful discharge lawsuit. A caller may phone to query whether an action of a "fellow employee" is in accordance with a company policy or practice when he or she is actually seeking permission or forgiveness for an action of his or her own. While the risk of these dangers may be small for a well-trained hotline staff, it is not completely avoidable.

A number of lessons have been learned over the years about the value of hotlines. We now know that hotlines can provide invaluable insight into management practices and operations. Callers use hotlines to report actual or perceived problems. This, at a minimum, provides a back avenue channel of intelligence to assist in identifying issues warranting attention. Following present policies and procedures will help to avoid difficulties and ensure that the hotline is functioning to its maximum potential.

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